'Time, money and expertise' biggest challenges for SMEs

Thursday 6 February 2014

Small firms that have had to downsize since the financial crisis claim getting the time, money and expertise needed to succeed is the biggest challenge to growth.

Research from the Forum of Private Business (FPB) revealed 36 per cent of small organisations, such as limited companies and sole traders, think time will continue to be a major challenge going forward. This will affect the way they manage their business and growth plans over the next 12 months.

Cash is also an issue for 26 per cent, while 13 per cent claim they lack the relevant expertise.

Alexander Jackman, head of policy at the FPB, said: "That time is now the biggest barrier for businesses growth potential in 2014 sends a clear message to government.

"Now is the time to build on the success of deregulation measures introduced and to really push on minimising the impact of some of the big employment law reforms currently in progress. A focus on creating stability of regulation for small businesses would be enormously helpful."

Accounting services can also help limited companies and sole traders save time on admin and trim margins.

This will be even more important as business rates and the cost of utilities increase.

Nevertheless, small businesses are largely positive about the year ahead, with 85 per cent optimistic for 2014. Indeed, over 80 per cent intend to grow their business over the next 12 months.

Workforce sizes are also expected to grow, with 30 per cent of companies planning on increasing headcounts. Furthermore, 15 per cent intend to increase the hours staff work.

When it comes to achieving growth, developing customer bases was named the most important growth strategy. Sixty per cent intend to target new customers, while 42 per cent will put the focus on customer service. For 41 per cent, new product development will be the core of growth plans.

However, the cost of doing business could throw a spanner in the works for some. The FPB explained that this is not just a concern for small business but a real obstacle for creating the confidence needed for a sustainable recovery.

On the other hand, it seems access to finance is improving. The number of businesses seeing the cost of finance as a barrier to growth has fallen from 36 per cent to 24 per cent, suggesting an improvement in the marketplace.

Yet figures from KPMG paint a slightly different picture. It revealed that more and more entrepreneurs are choosing to bankroll themselves rather than getting help from banks and lending institutions.

Among small to medium-sized enterprises (SMEs), only a third are looking for external funds to support growth plans.

Instead, 46 per cent of businesses plan to use their own cash reserves and 21 per cent intend to raise funds outside of their company.

KPMG has noted increased business confidence, however. They found 75 per cent of SMEs are more confident about their prospects than in the previous 12 months. A fifth also intend to expand internationally.

Iain Moffatt, head of regions at KPMG, said: "Nearly half of businesses are not willing to take on any risk associated with external finance and leverage their business, despite the reported optimism levels.

"This is an indication that companies are still very uncertain about the banking market, which some view as being unsupportive to small businesses during the recession."


By Victoria McDonnell

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